Below is a summary of some of the significant legal and regulatory actions that occurred over the past weeks. This alert is not intended to be a comprehensive list of all such developments, but rather a selection of publicly-reported news that may be of particular interest.

International Developments

Bermuda Announces Proposed Regulation for ICOs and other Crypto-related Activity

The Bermuda Monetary Authority released proposed regulation for initial coin offerings (ICOs) and other virtual currency activities on April 13. The proposed legislation addresses ICOs in detail, which would require potential issuers of ICOs to apply for consent to operate from the Minister of Finance. An application for consent would require the disclosure of information including corporate information of the entity planning the ICO, development and implementation plans for any product, service, or other project related to the ICO, amount intended to be raised through the ICO, timeline for the completion of the ICO, information related to the storage of identifying information of purchasers, and compliance and auditing protocols for token purchases. Bermuda Monetary Authority Consultation Paper – April 2018

Malta Seeks Feedback on ICO Consultation Paper

On April 13, the Malta Financial Services Authority (MFSA) announced that it is considering moving ahead with introducing a “Financial Instrument Test,” which would clarify how the law defines digital assets and provide guidance to determine whether a blockchain-based asset would fall under EU regulation or Malta’s proposed Virtual Financial Asset Act (VFAA). The MFSA originally introduced the Test on November 30 in a paper addressing ICOs and other services related to virtual currency and tokens. The April 13 consultation paper expands on the proposed Financial Instrument Test. The government is seeking input from the financial services industry and the public, who can respond to the proposed regulation via a survey on the MFSA’s website. MFSA website – Consultation Paper and Survey

Singapore Remains Committed to Fostering Blockchain Initiatives

Singapore’s minister of finance, Hen Swee Keat, made opening remarks at the 22nd ASEAN Finance Ministers’ Meeting in which he indicated that Singapore would continue to support innovations in the FinTech industry and acknowledged the potential that distributed ledger technology (DLT) can provide for the country more broadly. Specifically, Minister Keat discussed the current pilot project between Singapore and Thailand, a project focused on regional “fast payments linkages,” which rely on DLT. Although he did not provide details on other projects, Minister Keat indicated that Singapore is dedicated to exploring other blockchain initiatives that would facilitate financial transactions in Southeast Asia and lead to financial inclusion for underbanked areas in various countries in the region. Singapore Ministry of Finance Release 4.6.18

India and Pakistan Issue Warnings and Directives on Cryptocurrencies

In separate but similar statements, the Reserve Bank of India (RBI) and Pakistan’s central bank cautioned about the use of digital currencies in the respective countries. Both countries consider digital currency illegal. The Indian government and RBI previously issued cautions to the public earlier this year about digital currency, in which they indicated a commitment to eliminate the use of digital currency in the country. On April 6, the RBI began prohibiting banks from having any links to virtual currency businesses. On the same day, Pakistan’s central bank reiterated that cryptocurrencies are illegal in the country and the government directed banks and other financial services providers to refuse customers seeking to transact in cryptocurrencies. Reuters article 4.6.18

UK’s Financial Conduct Authority Issues Statement on Cryptocurrency Derivatives

The Financial Conduct Authority (FCA), a financial regulatory body in the UK, announced on April 6 that companies offering cryptocurrency derivatives would likely require authorization from the FCA. Any company seeking to offer cryptocurrency derivatives would need to comply with applicable FCA rules and EU regulations. The FCA does not currently regulate cryptocurrencies unless they are part of other regulated products or services; however, cryptocurrency derivatives could be considered financial instruments under the EU’s Markets in Financial Instruments Directive II (MiFID II). According to the FCA statement, activities that will likely require FCA authorization include cryptocurrency futures, cryptocurrency contracts for differences, and cryptocurrency options. FCA Announcement 4.6.18